A short sale in the real property (real estate) context—also known as a pre-foreclosure sale—is made when a homeowner sells their home for less than the balance due on the mortgage loan after the lender (bank) agrees to accept the lower amount in full satisfaction of the loan balance (a deficiency waiver).

Although the bank may waive its right to recover the balance or deficiency from you after the proceeds of a short sale are applied to your loan balance, a short sale will usually have a negative impact on your credit score—often as much as a foreclosure.

In New York, a short sale occurs when a homeowner sells their property for less than the amount owed on the mortgage with the lender's approval. The lender may agree to a deficiency waiver, which means they forfeit the right to pursue the homeowner for the remaining balance of the loan. While this can provide relief from the debt obligation, it is important to note that a short sale typically has a detrimental effect on the homeowner's credit score, similar to the impact of a foreclosure. The process involves negotiation with the lender, and homeowners often engage an attorney to assist with the transaction and to ensure that the terms of the sale and any deficiency waiver are clearly documented and legally binding. It is also important for homeowners to be aware that there may be tax implications, as forgiven debt can sometimes be considered taxable income, although there are exceptions and exclusions that may apply.